tv Book Discussion on Mother of Invention CSPAN February 16, 2014 10:45pm-11:47pm EST
[applause] >> my book released in november has the title with a slight sense of irony free-market is in quotations i talk about how the free market which we think of as the quintessential opposite of the government was created by the government. this is clear they a push back against the talk of recently to keep the government out of health care, my medicare coming is the government up to the task of reforming the health care system? after the shaky rollout is it capable of doing anything? i started this book in 2008 before there was obamacare or even president obama banda has a lot to say about the affordable care act white is the way it is with the content so events played themselves out as they did so that i can leave up to
what is happening today that is part of the historical picture. i start out with the conventional view of the widely held view of how government regulators and private industries interact or failed to interact which is true across the country. you can look get number of different industries. regulators on one side private industry on the other. people tend to see the regulators as a necessary evil to keep of some constraints on excess of the market but also as the lid of the innovation of the private market. they are an antagonist that the private industry should be as free as possible. i will argue they're really partners in a joint venture to use that metaphor if you
want to have a field of flowers somebody has to till, the garden garden, fertilize, insectici des, do one of carter's or the flowers? i argue to have robust private industry or free-market you have to have both. i begin each chapter with a quotation starting now looking at the conventional view with regulation and less interference in as $169 billion in tax. this comes from the cato institute that has a sleek but obviously. if you think about it the industry with 2.$7 trillion that is a low rate of taxation but i would argue it is more in the nature of the investment of the attack
it is what makes it possible. but this view has been pervasive if you look historically teddy roosevelt first raised the issue of the universal national coverage plan to did not succeed. then someone else picked up the call it is hard to read but from the left is the push back to talk about the social attempt to take over our health care system. so familiar 100 years later. in the 40's truman proposed a similar plan. that was called socialized medicine and if you can see the beer unit -- the puppeteer is described as, biggest tuned in the
'60s with medicare was proposed the actor at the time who may look familiar proposal was socialized medicine needed not only to a socialized health care system but the entire soviet-style economy. then with the affordable care act you off my health care, he and software of medicare government in the industry should not be mixing and government should stay out. i applied to propose is a partnership it is more like he did during and we could look at the free market. this is what i start with from adam smith from 17761 of the duties of the sovereign is to be paid public institutions and works without which the wonders would not be possible.
is initially some studies behind health care what would these industries look like if the government had not intervened? will with the computer industry look like if we did not have internet? but the government did create the internet. we had personal computers before the internet was commercialized. 1984 but it looks nothing like it was today but the interstate highway did a similar thing for automobiles with trucks and buses the satellites the government launched aa tb possible in to mortgage support made home construction impossible.
babied not the wisest program but it created a whole industry. so we can look in more detail to say how has this played out in what does that say about the debate to keep the government out of my health care? this is a graphic i came up with to visualize regulation going back to the 1800's the in the layer upon layer of medicare medicaid with health reform in the form of the affordable care act but will players don't go away with very few exceptions once in place if it stays. the conventional view would say is this crowding out the private sector? here is the growth of expenditures and the united states. if it were it would be a
good thing because we have seen astronomical growth that it is 18 percent of our economy and continues to grow at a rate in the developed world. as it has grown with the lefty and column -- left hand, it is now over 50 percent health care spending as a percentage of bedrolls big is now one quarter of all health care spending quite to the contrary it goes through the roof if there is the synergy not antagonism. isn't it is now 10 percent of all non-farm jobs in those shaded areas are
recessions this is a giant jobs program that has done quite a bit for the economy but i take for key sectors of health care to diving to those to show from the history or statistics it from case studies not despite i will spend most of this referring to pharmaceuticals but the medical profession with private health insurance are also aspects that i talk about if you buy the book you will see those issues discussed it much more detail. so look at pharmaceuticals. look at the largest company in the world talk about the national institutes of health the funds political
research to discuss private industry nih as the biotic industry acknowledges it as it crowds out private pharmaceuticals this issue with profitability, rates of return it is hard to read the numbers but consistently close at 20%. or heard of. those lines are the average for u.s. industry which is about four or 5% so it is about five times as profitable as the american norm over the last 20 years it is the most profitable and has been the top three every year. sales of pharmaceuticals have got the upper like wildfire. they have leveled off to talk about the government's role there. what doesn't have to do with
regulatory programs? the allies the free market who can offer a product you the bedrock foundation of the pharmaceutical industry as in the executive will tell you it is this program that makes this whole business model possible. we have the fda that instils customer confidence that the drugs we take will kill us are that they will lose their patience. the new drug law announced that we did not have a number of products like the ad for the cocaine toothpaste drops but the fda be sure that the drugs that were considered not say for kept away. of 1938 the law was steve chile disbanded after the
elixirs and antibiotic preparation and killing over one of the children as part of the fdr new deal regulation of drugs so the industry benefits from the assurance of safety that few other agencies have. as people look into this and cabinet to see a debug of manufacturer to go back company made it and made profits. if you know, the industry you to the fda is part of that. what few people see is the national institutes of health which funds most of the basic biomedical research that goes on in the world. almost $30 billion per year. the red is the stimulus but it still reads way up there. i argue a basic biomedical
research is something that benefits us all that a company cannot produce it because they cannot charge for it. if you make a finding it is a lot of nature for everyone to use. it is necessary to develop new drugs but is almost impossible to charge for also highly speculative with you invest to lenders to the cell structure, you don't know if it leads to nothing, this something in 50 years or next year. either company cannot take that risk. so the government steps since since 1930's to provide the public good so private industry can then attempt to commercialize and create products. . .
we have some additional properties and we have private industry labs and the tax law was isolated and sympathize and these days the purpose was to allow the technology industry to take off and they certainly succeeded at doing that. we also have other programs that i talked about as well. special regulatory favors and financing for companies that make drugs for rare diseases a major profitable subset and we are seeing this transformation of medicine before our eyes and gene-based therapies in the
developed a map of the genome with isolated specifics and now they are developing these routine therapies and diagnostic techniques and other ways as well. it has been slower to develop and we have developed a new center for advancing translational sciences was lost to explicitly find private companies that would commercialize gnomic therapy. and what it now does as they isolate the genes and they find potential drugs and they actually do the preclinical studies with labs and the animals and they do some of the actual clinical studies in humans which private companies
traditionally do and then they look for a private partner once some of the risk has been taken out once they establish that it is a likely candidate. this is the government creating the future of the pharmaceutical industry. huge therapeutic outcomes because the government is, before our eyes, creating it. and then when all is said and done a huge market for pharmaceuticals is the government again. this is a figure of medicare spending for different components. 11% as outpatient doctor's office and hospital and you put that all together and we are talking about at least $100 billion a year in sales for these products that the government develops in one hand and buys the products from the
other. so what with the industry have looked like and without question we would have fewer drugs and lower profits and less public trust and certainly nowhere near the frontier of biotechnology and genomic medicine that we are facing today. that may be overstating it a bit, but it's indispensable to the american off oil industry. hospital construction with constant dollars going up very steadily the early 1950s but after this was passed which pumped billions of public dollars in the 1970s right after medicare. one of my case studies is
non-for-profit chains which came into being in the late 1960s. what is it that brought them about? it is hardly a coincidence that right after medicare that we have attendance for for-profit change. it reassured investors that there was this duddy source of revenue and few others have the government pay the bills if there are shortfalls. and then i look at academic medical centers which rely on medicare to train the future doctors rely on nih for the research as well. we all know medicare spending and that will get reined in at some point. but in the meantime it is creating hospitals as we know them today.
and then we have ancillary providers and home health what was it be like? welcome if you're hospitals in the city's and rural areas and fewer ancillary providers. in this quote i love from the former president of cardiology, medicare made it as simple as that and we couldn't have stated it more truthfully. medicare spending doing this with the services and there's a number of doctors that started from an explicit government program and we have about twice
the number as we did back then and medical schools derive a significant amount of their revenues from these sources and heavily reimbursed by medicare and medicaid and federal grants and research to put them in there by 50%. that number has gone up again because medicare pays for them and the downside is that we have the way we pay for them, we have discouraged the primary care and would reimburse people under medicare much more generously the surgical and nonsurgical specials are double that. so i look at how that scale developed and how it has revised controlled by the ama, which is heavily sad with specialists.
so what would the medical profession look like with the government? we probably have more primary care and fewer specialists and lower salaries. finally private health insurance as the cbo pointed out. we subsidize it heavily with attacks rate for the insurance you get through an employer. this figure i find astounding. if you look at the upper right hand corner that number is up 35.4 and that is a percent of all the premiums paid in the country from employer-based insurance represented by the tax breaks and tax subsidies. 35% means more than one third of the cost of private employer-based health care service that is paid for by the government. that makes it the third most expensive government health care program after medicare and
medicaid and below a lot of people's radar screens and it has created the profitable private health insurance industry that we have today. we would not have the care had the government not begun funding may be for better or maybe for worse but it would not exist without it. and then the government is the managed care under medicaid managed care as a percentage of medicaid provided care companies and you can see that that is drastically going up in the '90s. private health insurance without government intervention, lesser-known managed care and perhaps a different political
advantage and it would be very different. and that is about obama's skill at getting private industry and pharmaceuticals and insurance plans and hospitals onboard, this promising new frontiers in business to new customers for insurance companies and the new patient for hospitals and there's a downside. one of them is regulatory capture and those that take over the regulators. >> and so they spent a lot of money making sure that the government generosity continues and that has resulted in the
most expensive system in the world, which i argue in the book and we spent almost twice as much per capita as any other industrialized country. and we've gone too far down the road to roll this back. for better or worse. we have a free-market system maintained by the government. i described a few ideas for ways to balance this and make it more efficient and doing something about the administrative complexity in terms of the proliferation of technology. in some cases the affordable care act, it but it might actually hurt and i think we can push this forward. so what would health care in
general quite if we had not intervened? well, the hospital pharmacy from the 1950s, at the upper right would be a hospital room from the 1950s. and then in the bottom we see the iconic picture of physicians office in the 1930s. and that would still be our health care. in our health care is reliant on us. [applause] >> i want to take you on a slightly different path through the same health care maze that the professor has so ably described. his book is a superb one and i would say buy it. it is a good story and one that
lawyers need to understand. what i want to do is think aloud with you about something that students and law students might be interested in. and that is the artifice of constructing on facebook that tries to encapsulate a complex world like this and tries to take all this material and put it in a way that physicians law students to get inside a field and when they start to practice, to understand that not just as it exists today, but with a sense of why it exists the way it does today. some sense of the history. without that, it's just a collection of papers stuck together. so what i want to do is propose what facebook should do, to understand the history and the
framework that defines the work of lawyers because this is their playground after all. in some fields nothing is slow today and it changes changes everything from health issues to dramatic changes in the organization of delivery. it is a field which lawyers look at and say oh, my goodness, have to learn this stuff, or they take the opportunities for clients including new revenue generation. the genesis of this facebook was a long economics conference that three of my cooperatives and i attended. we were the three progressive left-wing liberals that a
conservative economic conference where the idea was to spread the gospel of lost a fair capitalism. the four of us sat down almost immediately and said why are we here. and we understand this idea of economics, but this seems to be two mission driven. so we took napkins and we mapped out the framework for a helpful addition focusing on access to care and cost control of health care and quality of care and personhood, which is what the bioethics try to capture. we had done this first edition in 1987 and we really didn't need the economist to get after rapid changes in this profession. take this by the rapid velocity increase of money in the system.
so the book has a genesis driven by the market and trying to understand how health care was evolving with the medicare act which the hmo act has been a part of. and so the goal was to create something with these aims in mind that would try to capture the status quo unpredictable change. so let me see if i can take you through this rapidly with the shape of the book. there it is. 1819 pages of bathroom reading over several years. very dense. and the question is what is the task of this. so it's to provide organizing
principles and a regulatory tool. and so you need to look at the core relationships and health care delivery because it starts with core relationships to fundamental treatment as well and then treating the patient with complex problems that require long-term care of some kind and surgical intervention as well. including more and more technology and increasing information sources and health sources flooding them with us. the patient's relationship starts with the ability to get access to care and then if you
can't get access, you are a dying individual in many cases. this includes good quality care as a result of the affordable care act and increasing obsession with in-hospital management because they have to pay for this increasingly. and the patient has to contend with the payment of care and has become a dramatic issue today with rapidly increasing costs and so on. thirty have to look at hospitals and would spend a great deal of time on hospitals and the fact that they are all merging. as well as what i've been spurred you look at other institutions that are being spawned rapidly to retail clinics out of cvs and rite aid and the most important thing an artist to teach is private insurance to be retooled in the
affordable care act in the insurance exchanges in all of its ever-growing complexity. medicaid being the growth of revenue as they move into a managed care plan. they are excited. in the cases what is the parameters of the laws of your trying to teach because this is a huge topic. so you start with contract law with the fiduciary obligations as protectors of our interest because we are ignorance and they are not. we look at tort law is a kind of inadequate quality control mechanism that really exist at all by itself back in the 60s. without much other tools.
and there's a lot of system that includes this in our economy. and i'm going to come back to these rather rapidly. look at federal regulations or a regulatory model and that is certainly not unique. we have that with the military procurement and this is quite characteristic of how medicare tries to muscle good behavior through contract control. and then you have regulations through fine-tuning payment and withholding payment or pay per performance and is a professor has ably argued, once the government sets in place all of these mechanisms, the private
insurance tends to follow because it's easier to do so in many cases. so you follow the model. because it is easier for everyone, including those who are subject to this. in the third access to case the design and educational teaching is trying to set this up to be a lawyer, someone who looks ahead and sees what the problems are and understands the tensions in the system and the broader policy and you do that in a case but by picking cases that are new and challenging by judge richard pozen or who always pushes the envelope and depict things that are provocative beyond where the law can really safely predict. and you look at what this says. so the professor has focused on
this and most of these are false. the way you present things you rapidly make students realize that you can't test on that simply, it's really complicated. and number two is disclosure versus concealment because it is prudent as a risk manager and you have this tension that is playing out all of the time should they disclose this and the payment as well. and this is a much engagement versus professional judgment.
should we trust the doctor as a fiduciary to look out for our best interest? it would be passive to say yes. the law already informed consent and it is a failed option that works miserably. so this has to be captured in a casebook and you get to choose your own treatment in saying no, you get to choose this and to what extent do you have a voice and how can we end prove the decision-making in the quality of the decision-making. this shows up in the caselaw in the literature and its playing itself out. the hardest to capture it in the access to health care. in our access is much worse in many ways. even for those who have insurance. you don't have the ability to
pump us up for a highly technical treatment if we are not satisfied with what we did in italy and the u.s. can go there for something that you think is a good enough. and so let me back up here. that was the initial task i raise. and now they probably can't talk very much with a stethoscope. probably only a nurse can do that. and there is a hospital with a brilliant team. and we want our doctors to be
this good. then they have to have cover medical device regulations and products liability and all the problems that have to do with the doctor and patient relations and it's very complicated and it causes a lot of problems. and it will be part of this is an easy model as well. and so here is an example of what is happening with health information technology that is rapidly becoming an obsession and in health care and i think for the better. you can see what is happening. you can see the predictions over
time, up to 2018 in what you have to do and you have to figure out, how am i going to go my practice with a client that comes than and has an application for the iphone that is going to revolutionize this. and so you need to understand this technology. and especially when it comes to how the exchanges are going to be in this includes the cost
related access. and there is the uninsured no matter how you look at, you don't have access that matches our competition from the european union and canada. so here is an example of what happened with the out-of-pocket spending with the passage of medicare in 1965, moving into effective 1966 and the floodgates opened. and i don't know how to read it,
but one would expect them to be completely wired and everything was designed smartly. smart architecture. plus the parameters that i talked about, the fiduciary obligations and the good old days of trust me, i am a doctor. they indicated the income variations and can you trust them with the targeted income? and the agency model is slipping. medical malpractice and that they have, and it lobbyists have
made it very hard to sue, except for very large cases. there was a lot going on with waste. and the sadness of the institutions, for example, here's another controversial issue in health care. or is that another example for which we don't get benefit? the argument is the charity care on the left, the tax exemption is the center and they make a lot of money and a boundary
question including the internal revenue code. and here i recommend the professor's first book. and there are good examples of federal registration limits and there is a very overelaborate charge. and it's just as complicated. you have to recognize that this is the way you run things. finally the competing models much like with what the professor talked about. the american way of life, public schools and socialism public
highways in 1905 and public health care socialism as well. i looked through the google images and i found a number of republican lawmakers with socialism coming out of their mouth as recently as probably yesterday. and so the world will survive. and there's an example of a good model for thinking about it as well. we also talked about accountability and transparency. our employers also have to shop smartly. and this is the patient engagement model that i talked about before. and the lot pushes us with informed consent doctrine over
to the zone of self direction and i don't know what that means but i don't know if i trust it with what it means to turn too much over to patients like buying dietary supplements which are totally unregulated. i doubt it. and health reform in the affordable care act as well and how much would be better off to do the affordable care act. this is no longer a liberal state and it looks that calculations but how you do benefits. in one view of this heavy regulated model of health care
>> thank you i wanted to ask you about the nonprofit status. it's in the news now because of the new and if it rules with the ata and hospitals have to show how exactly they're going to benefit in the new stipulation that research doesn't count towards this community benefit and also the fact that the university medical center is being sued by the city of pittsburgh because they no longer have a terrible mission. and if you think this is a rule, but it gets updated with the aca and it will have an impact if they are looking for in terms of making sure that they are doing some sort of community thing.
>> they have been in an awkward situation since medicaid came into being. and it is their main reason when it went away. and we asked when they pick this up to do this with the community outrage and it will presumably pick up even more of that as well. and this includes investors who depend on tax exempt bonds and too many industries connected to the hospitals and i do think that we are going to chip away at it and i think that they will have new responsibilities and
they will begin to function even more is that the for-profit counterparts. >> this is a fire lit under hospitals and that sort of eerie and that describes a lot in the u.s. and i don't think this is going to go away. it seems empirically to produce this and be the quality of this and it seems to be better. the other thing is a lot of hospitals are mission driven by religious thought with a very high percentage of hospitals
of mass that is being treated with increasing health care costs and access going down and competition worldwide. so my only real question is that do either of you have any advice to actually fix the mass that we are getting into? >> and talked about this in the last couple of chapters of the book. and i think we are too far down the road. and we actually have this monster that comes back that feeds it and demands more and more money and it is a force to be reckoned with. so i don't think we are going to be turned back. but we can do have changed this in the fee-for-service have a lot to do with the inefficiencies and distortions of the system.
and we can design more with primary care. and that is really how medicare reimburses it and they can be changing that as well. and each one is the affordable care act that works. and we continue to harness it and the appropriate changes and that is something to be thankful for. >> my reaction is that it will
be a power of the transparency. certainly requesting the data and we are going to make it available for the first time and there are plenty of organizations that will sort it. and it changes them and embarrass them and make them uncompetitive compared to their peers and this is sort of a market driven part of data and they don't want to be embarrassed. i see not from the inside as well. because you don't want to have bad data on that.
>> i think the general transparency was a good thing. better to have information than not. most people won't use it. most people are not going to get to get to see if they prescribed a drug and what is the hospitals rated on medicare. however, there are going to be people who study public health who are going to look for that data. and they are going to make a difference in terms of how providers behave and i think that that can drive the system. and i think that we move the machine and it will end up being part of this. >> i agree with that. although i will have to say the closure is the chief regulatory
tool and it seems as if you're doing something with economic conflicts of interest or reducing these efforts. and then it goes up in a way that is hard to process or people just don't comply with the problems. so you can track how good you can look up three or four hospitals and then compare. and there are various positions that comply and it can be part of this would a website run by the time they have taken up these administrative cost of compliance in the record-keeping, they really don't care about little bonuses that they have. they will scrap it and it's too much time. some of these regulatory approaches haven't been thought through. but they will be refined. and i think that people, if you look at readmissions, you care
about that. >> and i think it matters and it will change over time. and health care is not static. so what does our wealth and i'm they were better tomorrow. with my fingers crossed. [applause] >> thank you. >> we can probably take one more question. do we have anyone? >> i was wondering what we could implement any regulations tomorrow, what would be the number one regulation that you would want to put in place tomorrow? >> if it were up to me and i were the health care person for
a day, i would pay fee-for-service and i think that is the core of our problems to pay someone for every little piece that they do and if you paid me for the number of minutes that i lectured, i would lecture for a lot more than i do. and if you paid me for every student comment, i would enlist a lot more comments. and i think that doctors and hospitals are exactly the same way. so i think the faster we do the experiment and we bundle payments and we have other ways of reimbursing to find out what works, the faster we will begin to resolve that issue. >> i agree with that. and i would like to talk about managed care. it seems to me that it's hard to change positions as it is
rolling along under income is dependent upon it. especially bundling as a result of this program with more efficiencies and hospitals. and it should be productive and right now i think it's the latest study that i thought that said that the care organizations were managing this and they weren't getting a new shared saving the net. so it hasn't proved out yet to be a boon in this particular model of efficiency. >> thank you for coming.